South Africa’s struggling state airline is making progress in talks to renegotiate debts due early this year as it seeks to avert the threat of closure, said the airline’s chief.
President Cyril Ramaphosa pledged to save South African Airways but his government has balked at the high cost of rescuing state-owned companies. Under Mr Ramaphosa’s predecessor, Jacob Zuma, SOEs became a byword for corruption and inefficiency.
Vuyani Jarana, who was appointed as chief executive of SAA to clean up the airline after years of misrule, told the Financial Times: “We are looking very clearly to restructure” the R9.2bn ($640m) of debts.
State-owned groups — including the power monopoly Eskom — are crucial to Africa’s most industrialised economy, but their mostly government-guaranteed debts threaten to overwhelm public finances unless Mr Ramaphosa reforms them.
The airline has been briefing its lenders on its plans for achieving a “path to profitability” to persuade them to accept delays in debt payments due in March, said Mr Jarana, who was appointed in 2017.
Easing pressure on SAA debt is critical as South Africa’s finance minister Tito Mboweni has signalled the state cannot afford to continue bailing out the lossmaking group. Mr Mboweni said last year that SAA should instead be closed and a new airline started.
Mr Mboweni’s comments reflected frustration among South African taxpayers over repeated bailouts for SAA, which slid into financial ruin under Dudu Myeni, the airline’s former chair and Mr Zuma’s close ally. She left SAA last year before the ruling African National Congress removed Mr Zuma from office.
SAA has not turned a profit since 2012 and made losses of R5.7bn during the latest financial year. Under Mr Jarana’s rescue plan, SAA is expected to break even in 2021 by overhauling wasteful supply chains and contracts that were allegedly used to dole out patronage under Ms Myeni.
“This is not misplaced optimism,” said Mr Jarana, who urged South Africans to back the turnround.
“We’ve shown that there is a board and management that is really focused on getting things done. We would like to do things a lot faster . . . but these are long legacy issues, long-term contracts” that cannot be easily abandoned, he added.
The former telecoms executive acknowledged that speculation about the government shutting the airline down was unhelpful.
“It creates an impression that the airline is going to die tomorrow. In fact we are here for the long haul . . . if [customers] have a sense we are not going to be there, they are not going to book with us,” Mr Jarana said.
Mr Jarana dismissed criticism that SAA had made a strategic mistake by focusing on Johannesburg as its main hub over Cape Town, South Africa’s second city and biggest tourist draw. SAA still saw Johannesburg as a gateway for the region even as airlines in rival hubs such as Addis Ababa have eaten into the southern African travel market, he said.
Despite speculation that the government had deterred Mr Jarana from pursuing a more radical turnround, he denied that he faced political interference. “I’ve not had one feeling that the government is telling us which route to fly or not to fly.”
